Putin plans to seize Yukos oil

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The battle for control of the Russian oil giant Yukos has taken a fresh twist after it emerged that the country's authorities have drawn up secret plans to seize control of the group's oil.

The proposal - said to have been masterminded by Igor Sechin, the first deputy in President Vladimir Putin's administration - would entail taking control of Yukos's oil as it is pumped through the country's distribution network, Transneft.

It is understood that under the plan, instead of the oil being marketed to Yukos's current traders, it would be diverted to a Kremlin insider and oil trader, Gennay Timchenko.

The proposal, believed to be among several alternatives being examined by the authorities, is in marked contrast to comments Mr Putin made last month that officials would do all they could to avoid the company's collapse.

The discussions come as the trial of Mikhail Khodorkovsky, the jailed oligarch and largest shareholder in Yukos, resumed yesterday. His trial for fraud and tax evasion is one of the most significant in Russia since the fall of the Soviet Union.

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His personal fortune of more than $A20 billion made him Russia's richest man, but it was his funding of liberal opposition parties that many say has caused his downfall.

On Friday bailiffs started to move in on the oil group after the authorities refused to give Yukos an extension on paying its $4.7billion tax bill.

A Yukos spokesman said plans to seize control of oil production was illegal. "The law allows the arrest of accounts, the arrest of assets and the sale of those assets. But it does not allow the arrest of production," the spokesman said. However, an executive close to the Government said Mr Sechin's plan to do just that was now the favoured option.

"Sechin has been drawing up the strategy for months," he said. "The research has all been done. The paperwork and the planning are now all in place. It is only waiting for the President's order for it to be enacted."

The spokesman for Yukos said he did not believe the authorities would seize all the company's oil right away. "They will take 20 per cent or 50 per cent and then increase it. They will not kill the company but slowly suffocate it."

Executives close to Yukos stressed on Sunday that Mr Sechin's plan was still one of several being examined - others include breaking up the oil group or even bringing in international investors - but nevertheless conceded that the pressure was mounting.